Amazon & all capital-led players are just waiting for their Patanjali moment

Moment of reckoning for startups at handSeptember 21, 2016, 08:15 IST

Image credit: ThinkstockBy Anand Lunia & Shailesh Vikram Singh﻿'The Amazon of India will be Amazon and not Flipkart or any other company' is a routine assertion by experts warning of the onslaught of global companies. These experts are using the recent non-performance of investors in India to say that the Indian entrepreneur and the Indian market are not capable of very much.

The Indian internet market, which started opening up in 1998, has been through a classical evolution, just like in the rest of the world. The first off the block were classifieds, jobs and travel companies.

Even as domestic startups tried to seize the first-mover advantage, global players (read US companies) jumped into the fray. And going by today's arguments, the Monster.com of India should have been Monster.com. But it is not.

Naukri (the jobs portal launched by internet company InfoEdge) has seven times the traffic of Monster India. The US company entered India soon after the Naukri IPO, and even bought an Indian job portal in 2004.

Later, a lot of pundits said LinkedIn will wipe out Naukri, which was hurt in a few segments for sure, but held on to its main service of bulk hiring. Meanwhile, Monster was sold for a value less than Naukri's market capitalisation and LinkedIn sold recently to Microsoft.

MakeMyTrip was the first consumer-internet startup from India to list on the Nasdaq in 2010. Its thin margins meant that it should have long lost to global biggies. But it hasn't.

Travelocity bought Travelguru, and had some interesting ad campaigns, but shut down India operations in 2013.

Expedia has been making noises for a few years, but is yet to make any headway. Both these sectors had no India-specific trade barrier, the competitors were cash-rich and had access to armies of 'better' quality talent from Silicon Valley .

In a world away from technology, Patanjali is the most interesting comeback of the Indian entrepreneur. Colgate Palmolive, Unilever and P&G have had an almost free run in India, with an occasional challenge from players like Nirma. But the phenomenal growth of Patanjali that has completely outflanked even the fabled distribution moat of global FMCG companies has taken everyone by surprise.

Patanjali did not poach top talent, did not give big incentives to retailers and did not sign up celebrities to endorse, practically making the standard playbook of FMCGs look like a copy of nursery rhymes.

Colgate-Palmolive India reported its worst sales growth in 44 quarters recently and Hindustan Unilever's revenue expanded at the weakest pace in more than six years. And in a huge validation of the size of the Indian market, Patanjali has grown to a revenue of Rs 5,000 crore in just five years and continues to grow at more than 100% a year.

Another famous battle has been that of Uber and Ola in India. Ola in these conversations is the supposed loser, which is indulging in wasteful discounts and providing poor service. Interestingly though, Uber pays more to its drivers and is cheaper for its consumers, but consumers use Ola as much as they use Uber. Most of the outperformance of Uber is just perception as of now, with capital as the main tool.

Experts are now predicting a reckoning for Indian startups as inevitable and that it lies just 12-18 months away, citing the example of Amazon. This while discounting has been the only real and effective strategy used by Amazon in India.

Amazon is winning customers in India because it offers more discounts and not because of any secret sauce. And this will not be enough as a long-term strategy for the US company. Amazon and all such capital-led players are just waiting for their Patanjali moment.

(Anand Lunia, is general partner at India Quotient; Shailesh Vikram Singh is executive director at Seedfund. Both fund earlystage ventures)